Product StrategyDr. Ananda Sabil Hussein

Product Strategy

Defines what the organization does and why it exists

Involves creating a product offering that is a bundle of physical (tangible), service (intangible), and symbolic (perceptual) attributes designed to satisfy customer’s needs and wants

Strives to overcome commoditization

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Types of Productsin Consumer Markets

Convenience Products

Shopping Products

Specialty Products

Unsought Products Products of which consumers are unaware Products of which consumers did not consider purchasing

until a sudden need or emergency arises

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Types of Productsin Business Markets

Raw Materials

Component Parts

Process Materials

MRO Supplies

Accessory Equipment

Installations

Business Services

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The Product Portfolio

Consists of Product Lines and Mixes Product Line – closely related product offerings Product Mix or Portfolio – total group of products offered by

the firm

Strategic Decisions Variety – number of product lines offered Assortment – depth of each product line

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Proctor & Gamble’s Portfolioof House and Home Products

7-6Exhibit 7.2

Potential Benefits ofWide Variety & Deep Assortment

Economies of Scale

Package Uniformity

Standardization

Sales and Distribution Efficiency

Equivalent Quality Beliefs

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Challenges of Service Products

Balancing supply (capacity) with demand

Time and place dependency of demand

Difficulty of evaluating service quality prior to purchase

Inconsistency of service quality

Difficulty in tying offerings to customer needs (i.e., the need is not always apparent to customers)

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Unique Characteristics of Services

Intangibility

Simultaneous Production and Consumption

Perishability

Heterogeneity

Client-Based Relationships

7-9From Exhibit 7.3

New Product Development

A vital part of a firm’s effort to sustain growth and profits

Depends on the firm’s ability to create a differential advantage for the new product

Customer perception of newness is critical

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Six Strategic Optionsfor Newness of Products

1. New-to-the-world products (discontinuous innovations)

2. New product lines

3. Product line extensions

4. Improvements or revisions of existing products

5. Repositioning

6. Cost reductions

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New Product Development Process

Idea Generation

Screening and Evaluation

Development

Test Marketing

Commercialization

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Branding Strategy

Involves selecting the right combination of name, symbol, term, or design that identifies a product

Brands have two parts: Brand name – words, letters, and numbers Brand mark – symbols, figures, or a design

Critical to product identification and the key factor in differentiating a product from its competition

Makes it easier for customers to find and buy products

Firms must protect brand names and brand marks from trademark infringement by other firms

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Strategic Issuesin Branding Strategy

Manufacturer vs. Private-Label Brands Private-label brands are more profitable for the retailer Manufacturer brands have built-in demand

Brand Loyalty Positive attitude toward a brand that results in a

consistent preference for that brand. Three levels: Brand recognition Brand preference Brand insistence

Brand Equity The value of a brand associated with its marketplace

position

Brand Alliances Strategies that involve close relationships with other

firms (e.g., cobranding, brand licensing)7-14

Advantages of Branding

7-15Exhibit 7.4

The World’s Twenty FiveMost Valuable Brands

7-16Exhibit 7.5

Packaging and Labeling

Often goes hand-in-hand in developing a product, its benefits, its differentiation, and its image

Includes issues such as color, shape, size, convenience

Often used to reposition the product or give it new and improved features

Vital to helping customers make proper product selections

Can have important environmental and legal consequences

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Differentiating and Positioningthe Product Offering

Product DifferentiationCreating differences in the firm’s offerings that set

them apart from competing offerings

PositioningCreating a mental image of the product offering

and its differentiating features

Perceptual MappingA visual, spatial display of customer perceptions

that allows monitoring of product positioning relative to other products

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A Hypothetical Perceptual Mapof the Automotive Market

7-19Exhibit 7.6

Differentiation Strategies

Branding is the most important tool. But, there are other important bases for differentiation:Product Descriptors (see Exhibit 7.7)

Product features – factual descriptors of the product and its characteristics

Advantages – performance characteristics of how the product behaves

Benefits – positive outcomes or need satisfaction

Customer Support Services Image

Overall impression that customers have of a product or firm 7-20

Positioning Strategies

Strengthen the Current Position

Repositioning

Reposition the Competition

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Managing Productsand Brands Over Time

Development Stage

Introduction Stage

Growth Stage

Maturity Stage

Decline Stage

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Stages of the Product Life Cycle

7-23Exhibit 7.8

Development Stage

No sales revenue during this stage

Components of the product concept:An understanding of desired uses and benefitsA description of the productThe potential for creating a complete product lineAn analysis of the feasibility of the product

concept

Customer needs should be discerned before developing marketing strategy

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Introduction Stage

Begins when development is complete

Ends when customers widely accept the product

Marketing strategy goals during this stage:Attract customers by raising awareness and

interest Induce customers to try and buyEngage in customer education activitiesStrengthen or expand channel and supply

relationshipsBuild on availability and visibilitySet pricing objectives

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Growth Stage (1 of 2)

Be ready for sustained sales increases

Rapid increase in profitability early in the growth stage that decreases at the end of this stage

Length depends on nature of product and competitive reactions

Two strategies:Establish a strong, defensible marketing positionAchieve financial objectives that repay investment

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Growth Stage (2 of 2)

Marketing strategy goals in this stage:Leverage the product’s perceived differential

advantagesEstablish a clear product and brand identityCreate unique positioningMaintain control over product qualityMaximize availability of the productMaintain or enhance the product’s profitability to

partnersFind the ideal balance between price and demandKeep an eye focused on the competition

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Maturity Stage (1 of 2)

Typically, no more firms will enter the market

Still an opportunity for new product features and variations

Typically the longest stage in the product life cycle

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Maturity Stage (2 of 2)

Four general goals in this stage:Generate cash flowHold market shareSteal market share Increase share of customer

Four options to achieve these goals:Develop a new product imageFind and attract new users to the productDiscover new applications for the productApply new technology to the product

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Decline Stage

Two options:Attempt to postpone the declineAccept the inevitability of decline

Harvesting Divesting

Factors to be considered during this stage:Market segment potentialThe market position of the productThe firm’s price and cost structureThe rate of market deterioration

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